THE HONG KONG INSTITUTE OF CHARTERED SECRETARIES. Suggested Answers

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1 THE HONG KONG INSTITUTE OF CHARTERED SECRETARIES Suggested Answers Level : Professional Subject : Corporate Secretaryship Diet : June 2008 The Suggested Answers are published for the purpose of assisting students in their understanding of what may be expected from a good candidate in the time allowed for each paper. They are in no way exhaustive nor model answer to the questions. They do not reflect the opinion of HKICS. 1

2 THE HONG KONG INSTITUTE OF CHARTERED SECRETARIES CORPORATE SECRETARYSHIP JUNE 2008 Suggested Answer SECTION A 1. (a) A director has no right of remuneration unless payment is made in the company s articles of association or the members approve the payment. Under Table A, the remuneration of directors shall from time to time be determined by the company in a general meeting. This remuneration shall be deemed to accrue from day to day. The directors may also be paid all travelling, hotel and other expenses properly incurred by them in attending and returning from meetings of the directors or any committee of the directors or general meetings of the company or in connection with the business of the company. (b) The major services provided to the general public include the following: Registration of a new company including incorporation of a limited company in Hong Kong (local company) and registration of a company incorporated outside Hong Kong which has established a place of business in Hong Kong (i.e. non-hong Kong company) Change of company name including the change of name of a local limited company and a non-hong Kong company Registration of documents of registered local and non-hong Kong companies Search on company information including records of companies registered under the Companies Ordinance, Limited Partnerships Ordinance, Registered Trustees Incorporation Ordinance and Miscellaneous Incorporation Ordinance; and registered particulars of licensed money lenders Deregistration of defunct solvent private company (c) A resigning auditor can give a written requisition to the directors to convene a general meeting for the purpose of receiving and considering an explanation of the circumstances connected with his resignation. The director, must, within 21 days from the auditor s deposit of a requisition, convene a general meeting to be held by giving not more than 28 days notice. The resigning auditor is also entitled to attend and receive notice and to be heard at the general meeting. (d) There are no periods of retention specified in the Companies Ordinance, except that in the register of members, a company must enter the date on which a person ceased to be a member, and all entries in the register relating to a person who ceased to be a member must be retained for a period of 30 years from the date the person ceased to be a member; and a company must keep its accounting records for seven years from the end of the financial year to which the last entry made or matter recorded therein relates. (e) A shorter period of notice is applicable for convening an annual general meeting if consent can be obtained from all the members who have a right to attend and vote at the meeting. When convening any other general meeting, a shorter period of notice is applicable if 2

3 consent can be obtained from the majority of members in number, holding at least 95% of the nominal value of the shares and having the right to attend and vote at the meeting. (f) Ordinary resolutions are passed by a simple majority of members who are entitled to vote and do vote at the meeting whereas special resolutions need to be passed by a majority of not less than three-fourths of members who are entitled to vote and do vote at the meeting. Unless the members consent to short notice, the minimum period of notice required for passing an ordinary resolution (except for those routine items considered in an annual general meeting that require 21 days notice) and a special resolution should be 14 days and 21 days respectively. (g) Points of order are objections to the irregularity of convening, constituting or the conduct of the meeting. A person wishing to speak on a point of order must state his intention clearly in his opening words. Since points of order must be taken immediately, the person speaking at that time must expect to be interrupted. Once the person taking the point of order has finished his remarks, he must resume his seat. He should not continue to speak on other matters apart from the point of order. (h) When an investor wishes to conceal his ownership in a company, he can have the shares registered in the name of a nominee. The nominee should execute a declaration of trust, whereby the nominee declares that he holds the shares in trust for the beneficial owner, and a blank instrument of transfer, i.e. the nominee signs as a transferor on an instrument of transfer. The declaration of trust should then be forwarded to the Stamp Office for adjudication. Subsequently, the aforesaid documents together with the relevant share certificate should be kept by the investor. (i) The Listing Rules stipulate the information required in a prospectus. In general, the contents of a prospectus include information such as the business activities, assets and liabilities, profits and losses, management and prospects of the company, material contracts not in the ordinary business of the company, the rights attaching to the securities to be issued and the amount to be raised. The purpose of issuing a prospectus is to provide the general public with information regarding the company so that the risks of investment can be assessed. (j) The redemption monies of bull and bear debentures are linked to either a commodity or financial index, e.g. gold, the Hang Seng Index. In the case of bull debentures, the amount of redemption monies receivable by the debenture holders on redemption will increase if the price of the commodity to which the debentures are linked increases in comparison with the price of the commodity at the time of issue, and vice versa. In the case of bear debentures, the redemption monies receivable by the debenture holders on redemption will decrease if the price of the commodity to which the debentures are linked increases, and vice versa. 3

4 SECTION B 2. (a) A member who is entitled to attend and vote at a general meeting is entitled to appoint another person as his proxy. A proxy need not be a member. Hence, Diamond Limited can appoint a proxy in writing under its seal or under the hand of an authorised officer, say Dennis. The proxy must be deposited with the registered office of Global Trading Limited at least 48 hours before the time of the meeting. A proxy can only vote on a poll or join in demanding a poll. Since Diamond Limited holds more than one-tenth of total voting rights of all the members (2,000 shares out of a total of 5,000 shares) having the right to vote at the meeting, its proxy may demand a poll (Table A, Article 60) and vote against the resolution for the change of name. Alternatively, Diamond Limited may appoint a corporate representative by resolution of its directors to act as its representative at the general meeting of Global Trading Limited. The person so authorised shall be entitled to exercise the same powers on behalf of Diamond Limited which he represents as that corporation could exercise if it were an individual member of the company. A certificate under the seal of Diamond Limited may be required as evidence of the appointment and be produced by the representative up on attending the meeting or [lodged with Global Trading Limited beforehand]. On a show of hand, Diamond Limited cannot out vote three. Hence, Diamond Limited s representative should demand a poll before declaration of results and vote against the resolution on the poll. (b) Before the general meeting, the company secretary should draft and send out notice of the meeting, forms of proxy and circulars as may be required. Since changing the name of a company requires the passing of a special resolution, the company secretary should ensure a clear days notice of at least 21 days for the general meeting. The company secretary should also ascertain from the Companies Registry whether the proposed name is available for registration. An attendance register should be prepared to register attending shareholders, proxies and corporate representatives. Lastly, the company secretary should verify any proxies lodged prior to the meeting and marshal proxies accordingly. 4

5 Global Trading Limited (the Company ) (incorporated in Hong Kong with limited liability) Minutes of the Extraordinary General Meeting of the Company held at [Place] on 4 June 2008 at [Time] Present: Anderson (Chairman of meeting) Brondson Charles In Attendance: Ellen (Secretary of meeting) Absent: Diamond Limited Chairman Anderson was in the chair. Notice and Quorum The chairman declared that due notice of the meeting had been given to all shareholders and a quorum was present. Accordingly, the meeting was duly convened and constituted. Change of Company Name Proposed by Brondson and supported by Charles, it was RESOLVED that the following resolution has been passed as a special resolution: That, subject to the approval of the Registrar of Companies, the name of the Company be changed from Global Trading Limited to Global Sourcing Limited with effect from the date of issue of the relevant certificate of incorporation on change of name. There being no other business, the meeting closed at [Time]. Chairman 5

6 3. (a) (i) Mr. Fleming should be required to present the probate together with a written request to the company in order to enter his name in the register of members. Alternatively, he can present to the company for registration a stamped instrument of transfer transferring the shares to his name together with the relevant share certificate(s). A new share certificate in favour of Mr. Fleming will then be issued. (ii) Mrs. Walker should present the death certificate, probate or letters of administration as evidence of her husband s death. Since the shares are jointly held, the shares will vest in Mrs. Walker, the survivor of the joint holding. The name of Mr. Walker will be deleted from the register of members, i.e. only the name of Mrs. Walker will appear. A new share certificate in favour of Mrs. Walker will then be issued. (iii) Mr. Robinson should be required to notify you in writing (with his signature) of his change of address. On receipt of the signed notification, the signature should be compared with the specimen signature kept by the company. Then, the address should be updated in the register of members and thereafter all future correspondence will be sent to the new address. (b) There was tabled before the meeting a letter dated [ ] from Mr. Jacobs reporting that share certificate No.008 for 8,000 shares registered in his name had been mislaid and he requested that a new certificate for 8,000 shares be issued to him. It was noted that a letter of indemnity (or a bank guarantee) had been given by Mr. Jacobs in favour of the Company. It was resolved that share certificate No.008 be cancelled and that a share certificate No.[ ] for 8,000 shares be issued to Mr. Jacobs and such particulars be entered in the register of members accordingly. It was further resolved that two Directors be authorised to sign and affix the Common Seal thereto. 6

7 4. If Innovative Limited operates a retail business in Hong Kong, it is regarded having established as a place of business as defined in section 341 of the Companies Ordinance and hence registration as a non-hong Kong company under Part XI of the Companies Ordinance is required. Innovative Limited should, within one month after establishing a place of business in Hong Kong, deliver the following documents to the Companies Registry for registration: a certified copy of the memorandum and articles of association of the company a Form N1 containing the date when the company established its place of business in Hong Kong; the dates of appointment of the company s directors and secretary; the identification details of the authorised representative in Hong Kong and the date when this person was authorised; and a description of the documents submitted together with Form N1. a certified copy of the company s certificate of incorporation a cheque for $1,720, being the registration fee and the filing fees for the documents filed Innovative Limited must authorise at least one person resident in Hong Kong to be its authorised representative to accept service of process and notices on behalf of the company. An authorised representative may be a natural person, a firm of solicitors, a solicitor corporation, a firm of certified public accountants (practising) or a corporate practice within the meaning of section 2 of the Professional Accountants Ordinance (Cap. 50) but may not be any other form of body corporate or firm. Innovative Limited should, within one month after establishing a place of business in Hong Kong, apply for a business registration certificate from the Business Registration Office and renew its business registration annually. The certificate must be exhibited in a conspicuous position in the company s place of business in Hong Kong. Subsequently, the company is required to deliver to the Companies Registry for registration returns in specified forms containing particulars of the alterations within one month after the dates of the respective alterations, as follows: the charter, statutes or memorandum of the company or other instrument defining the constitution of the company (Form N5) the details of the directors, secretary or authorised representative of the company (Form N6) the particulars of the directors, secretary or authorised representative of the company delivered to the Registrar under Part XI (Forms N7 or N8) the address of the principal place of business of the company in Hong Kong or its registered office (or its equivalent), or the address of its principal place of business in the place of its incorporation (Form N9) Innovative Limited should deliver to the Companies Registry for registration within 42 days after each anniversary of the date of registration of the company under Part XI a Form N3 containing full particulars of the company; or Form N4 where there has been no alteration in the particulars required to be filed since the date of the last return. 7

8 5. (a) Corporate insiders are those persons who control, or are in a position to control, interests in shares in listed corporations and those who may benefit from transactions involving associated corporations of listed corporations. Corporate insiders include substantial shareholders, i.e. individuals and corporations who are interested in 5% or more of the voting shares in a listed corporation, and directors and chief executives of a listed corporation. An associated corporation is a holding company or a subsidiary of the listed corporation; or a subsidiary of the listed corporation s holding company; or a corporation in which the listed corporation is interested in 20% or more of the issued shares of any class of its share capital. Since 25% of the issued shares of 2X Limited are held by 3X Limited, 2X Limited is an associated corporation of 3X Limited. Mr. Ho is not a substantial shareholder since his interests (3,000 shares, including a personal interest in 1,000 shares and a deemed interest in 2,000 shares) fall below 5% of the issued shares of 3X Limited. He has no disclosure obligation as a substantial shareholder. However, as a director of 3X Limited, a listed corporation, Mr. Ho has to disclose his interests and short positions in any shares in 3X Limited (or any of its associated corporations) and his interest in any debentures of the listed corporation (or any of its associated corporations). Hence, he has to disclose his personal interest (1,000 shares); his deemed interests (2,000 shares) in 3X Limited held through Platinum Limited in which Mr. and Mrs. Ho together hold 55% of the voting shares before Mrs. Ho sells her 25% voting shares; and the 5,000 debentures interest in 2X Limited (an associated corporation of 3X Limited). After Mrs. Ho has sold her voting shares in Platinum Limited, Mr. Ho no longer holds a controlling interest of more than one-third of the voting shares in Platinum Limited. Hence, the 2,000 shares in 3X Limited held by Platinum Limited are not regarded as deemed interests of Mr. Ho and need not be disclosed under Part XV of the SFO. The above shareholding disclosure in 3X Limited must be made to 3X Limited and the Stock Exchange of Hong Kong Limited within three trading days of the date of the relevant event. (b) If Mr. Ho fails to disclose his interest in accordance with the provisions of Part XV of the SFO, he may commit a criminal offence. Hence, he may be liable on conviction on indictment to a fine of $100,000 and to imprisonment for two years; or on summary conviction to a fine of $10,000 and to imprisonment for six months. The Financial Secretary may also impose restrictions on the transfer of his shares. 8

9 6. A general offer is an offer made to all shareholders of the company concerned (whether public or listed companies) to acquire their shares at a stated price. Subject to exceptions, a general offer may be required when: any person acquires, whether by a series of transactions over a period of time or not, 30% or more of the voting rights of a company; two or more persons acting in concert collectively hold less than 30% of the voting rights of a company, and any one or more of them acquires voting rights with the effect of increasing their collective holding of voting rights to 30% or more of the voting rights of the company; any person holds not less than 30% but not more than 50% of the voting rights of a company and that person acquires, in any period of 12 months, additional voting rights with the effect of increasing that person s holding of voting rights of the company by more than 2%; or two or more persons acting in concert collectively hold not less than 30%, but not more than 50%, of the voting rights of a company, and any one or more of them acquires, in any period of 12 months, additional voting rights with the effect of increasing their collective holding of voting rights of the company by more than 2%. Once Mr. Li s interests in Fortune International Limited reaches 30% (now 27.5%), he will be required to make a general offer unless he has obtained exemption in doing so. According to the Code on Takeovers and Mergers, the general principles for making a general offer are as follows: All shareholders are to be treated even-handedly and all shareholders of the same class are to be treated similarly. If control of a company changes or if the control is acquired or consolidated, a general offer to all shareholders is normally required. During the course of an offer, neither an offeror nor the offeree company nor any of their respective advisors may furnish information to some shareholders which is not made available to all shareholders. An offeror should announce an offer only after careful and responsible consideration. Shareholders should be given sufficient information, advice and time to reach an informed decision on an offer. No relevant information should be withheld. All documents must be prepared with the highest possible degree of care, responsibility and accuracy. All persons concerned with offers should make full and prompt disclosure of all relevant information and take every precaution to avoid the creation or continuance of a false market. Rights of control should be exercised in good faith and the oppression of minority or noncontrolling shareholders is always unacceptable. Directors of an offeror and the offeree company must always, in advising their shareholders, act only in their capacity as directors and not have regard to their personal or family shareholdings or their personal relationships with the companies. They should only consider the shareholders interests taken as a whole when they are giving advice to shareholders. The board of the offeree company may not take any action in relation to the affairs of the company, without the approval of shareholders in general meeting, which could effectively result in any bona fide offer being frustrated or in the shareholders being denied any opportunity to decide on its merits. All parties concerned are required to cooperate with the Executive of the Securities and Futures Commission, the Panel and the Takeovers Appeal Committee, and to provide all relevant information. 9